COAG’s reform of federal financial relations(Whose buck is it anyway?)

Mary Ann O’Loughlin

Executive Councillor and Head of Secretariat

2010 IPAA National Conference

22 October 2010

OUTLINE

Context

Accountability arrangements

Are the new accountability arrangements robust enough?

The ‘bold experiment’

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CONTEXT

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Australia’s federal relations

Key features:• vertical fiscal imbalance

– States have large expenditure responsibilities relative to revenue raising capacities — rely on transfers from the Commonwealth

• overlapping roles and responsibilities for service delivery– associated with fragmentation, duplication, lack of

coordination, blurred accountabilities .

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ALP national platform for 2007 election

‘Many of Australia’s biggest policy challenges involve the intersection of Commonwealth and State government responsibilities. In government, reforming the Federation will be an important priority for Labor. The cost shift and blame shift between governments costs Australian taxpayers billions of dollars each year. There is too much ambiguity about which level of government is responsible for a particular government program.’

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Intergovernmental Agreement on Federal Financial Relations December 2008

• ‘represents the most significant reform of Australia’s federal financial relations in decades’– governs all policy and financial relations between

the Commonwealth and the States.

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New financial arrangements

• National Specific Purpose Payments (SPPs)

- supported by new National Agreements

• National Partnership payments

- associated with National Partnership Agreements

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National Specific Purpose Payments

• Multiple payments (60+) collapsed into five new National SPPs– school education

– skills and workforce development

– healthcare

– affordable housing

– disability services

• Ongoing financial contributions from Commonwealth– States and Territories have full budget flexibility to allocate

funds as they see fit to achieve the agreed objectives for the sector. 8

National Agreements

• In specific areas of service delivery:– Healthcare, Disability Services, Education, Skills and

Workforce Development, Affordable Housing, Indigenous Reform

• Define the objectives, outcomes, outputs, and performance indicators

• Clarify the roles and responsibilities of the Commonwealth and the States and Territories.

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National Partnerships

• New incentive payments to drive reform:– to support delivery of specified projects– to facilitate reforms– to reward jurisdictions that deliver on national reforms

• National Partnership Agreements define the objectives, outputs and performance benchmarks– Literacy and Numeracy – Improving Teacher Quality– Preventive Health– Elective Surgery Waiting List Reduction Plan– Seamless National Economy

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ACCOUNTABILITY ARRANGEMENTS

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COAG Reform Council

• Independent organisation set up by COAG to monitor, assess and report on the performance of governments in implementing nationally agreed reforms

• Reports annually to COAG on:– National Agreements– National Partnerships– aggregate pace of activity in progressing reform agenda

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Structure of the National Education Agreement

Ou

tco

mes

Objective

All Australian school students acquire the knowledge and skills to participate effectively in society and employment in a globalised economy.

All children are engaged in and

benefitin g from schooling

Young people are meeting basic literacy and numeracy standards, and overall levels are improving

Australian students excel by international standards

Young people make a successful transition from school to work and further study

Schooling promotes the social inclusion and reduces the educational disadvantage of children, especially Indigenous children

Per

form

ance

In

dic

ato

rs

Proportion of children enrolled in and attending school, by Indigenous and SES status

Literacy and numeracy achievement of Year 3, 5, 7 and 9 students in national testing, by Indigenous and SES status

Proportion of students in the bottom and top levels of performance in international testing

Proportion o f 20-24 year olds having attained at least Y ear 12 or equivalent, by Indigenous and SES status

The proportion of Indigenous students completing Year 10

Proportion of 18 -24 year olds engaged in full time employment, education or training at/ above Certificate III

Tar

get

s

Lift the Year 12 or equivalent attainment rate to 90 per cent by 2015

Halve the gap for Indigenous students in reading, writing and numeracy within a decade

At least halve the gap for Indigenous students in Year 12 or equivalent by 2020

Year 3 Reading: proportion of students achieving at or above national minimum standard, 2009

Contextual factors NSW Vic Qld WA SA Tas ACT NT Aust

Population in most disadvantaged SES area (%)

15 10 13 4 22 33 0.2 34 13

Indigenous population (‘000) 153 34 145 71 28 18 4 64 517

Proportion of population Indigenous (%)

2 1 4 3 2 4 1 30 3

Proportion of Indigenous population in remote areas (%)

5 np 22 43 19 np na 80 25

Indigenous students (%) 4 1 6 7 3 6 2 41 4

Students from a LBOTE (%) 25 24 13 17 15 6 19 26 20

Students in remote areas (%) 1 0.1 3 7 4 1 na 46 2

Average scores for Reading: change between 2008 and 2009

Year 3 Year 5

NSW ▲ ▲Victoria ▲ ▲Queensland ▲ ▲Western Australia ▬ ▲South Australia ▬ ▬Tasmania ▬ ▲ACT ▲ ▬Northern Territory ▬ ▬Australia ▲ ▲

Average scores for Reading Year 3 by Indigenous status: change between 2008 and 2009

Indigenous Non-indigenous

NSW ▬ ▲Victoria ▬ ▲Queensland ▲ ▲Western Australia ▬ ▲South Australia ▬ ▬Tasmania ▬ ▬ACT ▬ ▲Northern Territory ▲ ▬Australia ▲ ▲

ARE THE NEW ACCOUNTABILITY ARRANGEMENTS ROBUST ENOUGH?

Conceptual basis of agreements

Availability of performance information

Whose buck is it anyway?

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Context

‘The new framework for federal financial relations replaces Commonwealth prescriptions on state and territory service delivery with a new focus on the achievement by all levels of government of mutually agreed objectives and outcomes.’ (IGA, C2)

Conceptual basis of agreements

• Must be strong links between performance indicators and reform objectives and outcomes

• For public accountability, must be able to coherently report progress against agreement

Availability of performance information

• Must have robust, comparable, timely information on performance, and be able to assess change over time.

Heads of Treasuries review

• Review of National Agreements and National Partnerships – consistency with design principles of the Intergovernmental

Agreement– clarity and transparency of objectives, outcomes, outputs,

and roles and responsibilities– quantity and quality of performance indicators and

benchmarks.

Whose buck is it anyway?

• Tensions between outcomes focus, flexibility and public accountability

Macklin gets tough with statesPATRICIA KARVELASPOLITICAL CORRESPONDENT

INDIGENOUS Affairs Minister Jenny Macklin has backed a planthat would strip states and territories of federal funds if they didnot meet targets for Aboriginal children attending and completing school and failed to meet health targets.Remote Indigenous Services Coordinator-General Brian Gleesonhas called on Julia Gillard to take money away from states underachieving in indigenous education and health, and boostpayments to those improving results and retention rates.

The Australian 11 October 2010, p. 2

Are the new National Partnerships becoming the old specific purpose payments?

‘There are still around 130 payments under national partnership agreements, with new payments being created on a regular basis and many payments project specific or otherwise subject to detailed conditions.’

Department of Finance and Deregulation,Incoming Government Brief, p. 3.18

Commonwealth payments to States, 2007-08 to 2010-11: %

Payments 2007-08 2010-11 2011-12

Previous payments for specific purpose

42.9 — —

National Partnership payments — 20.6 15.3

National Specific Purpose Payments

— 27.7 16.0

Health & Hospital Network funding — — 28.2

GST 57.1 50.9 39.8

Other general revenue assistance — 0.8 0.7

Total100.0

($74 624 m)

100.0($94 082 m)

100.0($94 172 m)

Source: Commonwealth of Australia 2010, Australia’s Federal Relations, Budget Paper No. 3, p. 20

THE ‘BOLD EXPERIMENT’

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Leadership federalism

• Recognises the historical shift – and acceptance by the Australian people – of the Commonwealth’s involvement in policy areas over which technically it has no power.

• Maintains the advantage of federal systems that allow decisions to be made by governments closest to the people affected by the them, which also allows for policy exploration and experimentation.

Bolstering the bold experiment

• Bold reassessment of:– priorities for data development and collection– how the Commonwealth and States conduct their

day to day affairs.

www.coagreformcouncil.gov.au